April 26, 2018

Puerto Rico lost electricity again on April 18th, seven months after Hurricane Maria first knocked out the island's power grid. For people in some remote rural areas, the blackout was more of the same. Their power had yet to be restored.

The dangerous fragility of Puerto Rico's energy systems has put other Caribbeancountries on high alert. Across the region, electric grids are dated, ailing, and overburdened—making it easy work for a powerful passing storm.

Now that task seems far more urgent. To move beyond fossil fuels, Caribbean countries must transform their energy systems by building in new, greener sources of power. That will also make electric grids more resilient to weather extremes because they will be decentralized—pulling from a diverse array of power sources.

CLIMATE CHANGE IN THE CARIBBEAN

Unfortunately, I believe that climate change will also complicate the region's transition toward renewable energy. The Caribbean is comprised of island nations, which are the world's most vulnerable places when it comes to rising seas, changing weather patterns, and other effects of global warming.

The Caribbean is already seeing more weather extremes. Research suggests, for example, that northern Caribbean countries like Cuba, Jamaica, and the Bahamas have gotten rainier over the past three decades, though historical data is limited.

WHY TRADITIONAL ENERGY SOURCES NEED TO ADAPT

Installing more wind, solar, and hydropower—the world's most reliable and common renewable energy options—would seem to be a more obvious step in the right direction. Between 2015 and 2016, the global capacity of these green power sources rose 9 percent —nearly half of which comes from the widespread adoption of solar panels.

Changing precipitation and temperature patterns in the Caribbean also affect hydro and solar power. More rain in the region's north means fewer sunny days than anticipated. Higher temperatures in other countries suggests increased likelihood of drought, leading rivers to run dry.

Climate change is a profoundly unpredictable process, though. That makes it harder for weather models to correctly identify which renewable energy infrastructure should be built where.

THE FUTURE IS NOW

The Caribbean is making progress in planning for a future of more renewable energy, though.

Jamaica aims to install new automated weather stations that will collect real-time weather data nationwide. This initiative will help meteorologists across the entire Caribbean better predict future weather, which in turn supports the development of renewable energy systems.

So will a new climate model developed by my colleagues at the University of the West Indies. The system, called SMASH, can aid planners in siting wind farms and predicting the path and severity of the hurricanes that could mangle turbines.

A new Caribbean drought atlas from Cornell University has compiled climate data going back to 1950. The tool won't just help sustain food production during dry times; I believe it will also provide engineers precipitation data that's critical to planning hydropower enterprises.

Wind farms, too, are adapting to the instability of this changing climate. Once firmly pegged to the ground, turbines can now float thousands of feet above the land, spooled out like kites to capture winds where they blow hardest. Floating turbines will also fare better during hurricanes.

All of these technologies may eventually help Caribbean countries navigate their way through climate change toward a real renewable energy boom. But the climate change conundrum won't be solved before the 2018 hurricane season hits.

This article was originally published onThe Conversation. Read theoriginal article. Masaō Ashtine is a lecturer in alternative energy at the University of the West Indies—Mona Campus.

December 10, 2016

An agreement between the South Florida Container Terminal and Port of Miami Terminal Operating Company could be the first of many at US ports.

WASHINGTON — US regulators are reviewing a proposed agreement between two marine terminal operators at the Port of Miami that would allow the terminals to jointly negotiate terms and conditions with container lines — a first for the United States.

Although the port of Seattle and Tacoma came together operationally as the Northwest Seaport Alliance in 2015, this is the first time two marine terminals have sought the Federal Maritime Commission’s blessing to create their own alliance. Miami’s South Florida Container Terminal and Port of Miami Terminal Operating Company want to jointly negotiate, set, and approve terminal rates, charges, rules, and regulations, and rates of return between the terminals.

South Florida Container Terminal is an APM terminal, in essence, with the added benefit of a common user terminal designation. POMTOC was PortMiami’s only common user terminal until the port made all three terminals common user, including the Sealand Terminal.

But as Maersk withdrew from its APM terminals and sold interests in them, the benefit of Maersk’s exclusive calls at it’s terminals was displaced by a need for greater warf space and increased need for limited SuperpostPanamax cranes. Rather than compete for the limited resources at PortMiami and drive down costs in the competition the two adjacent terminals decided it would be easier to collaborate.

The terminals’ request parallels the vessel-sharing agreements container lines have formed to pool their cargo in larger ships in order to mitigate overcapacity and broaden their networks. Through the alliances, the container lines still compete with fellow members, and are forbidden from jointly marketing, selling, or contracting with third-parties, such as tug operators and stevedores.

According to FMC Commissioner William Doyle, agreements such as that in Miami are a direct response to the Ocean Alliance, a VSA between China Cosco Lines, Evergreen Line, CMA CGM, and Orient Overseas Container Line set to take sail in April.

The Miami terminals did not respond to requests for comment from JOC.com.

“Since the Ocean Alliance is allowed to jointly negotiate as an alliance with marine terminals who agree to do so, some marine terminal operators and port authorities may want to explore options for entering into their own alliances where they could jointly negotiate terms and conditions with the ocean carriers,” Doyle said at a North Atlantic Port Association meeting outside of Washington, DC. last week.

FMC commissioners say they have also been approached by others, including the South Carolina Ports Authority, regarding a potential partnership with another Southeast port operator.

Doyle said the Miami terminals’ discussion agreement is a step beyond that of the Northwest Seaport Alliance, which gained the FMC’s green light in July 2015, because it will also allow those terminals to jointly negotiate terms and conditions for services with the ocean carriers.

Language in the proposed agreement includes conference and rate-setting authority that would allow the terminals to discuss and agree on matters of rates, charges, rules, and regulations through joint or individual marine terminal operator agreements with ocean common carriers. Additionally, the proposal would authorize the terminals to meet individually or as a group with one or more users, including ocean common carriers, to discuss any matters related to rates, charges, rules, and regulations.

The agreement appears to allow the terminals to jointly meet with a group of ocean common carriers, like an alliance grouping, and come to a joint agreement for services, Doyle said.

The draft agreement submitted on Nov. 16 is still under review, but has received some positive feedback from the likes of Doyle and Cordero. As with vessel-sharing agreements and the agreement for the Northwest Seaport Alliance, the FMC is expected to publish the language of the agreement for a public comment period. The FMC will then have 45 days to request additional information before making a decision.

“At the end of the day, you can’t have major ports in the same region independently trying to address issues in the supply chain,” Cordero said. “This agreement allows the FMC to monitor this in such a way that it doesn’t border collusion or anticompetitive behavior.”

Contact Reynolds Hutchins at reynolds.hutchins@ihsmarkit.com and follow him on Twitter: @Hutchins_JOC.

December 01, 2016

According to vesselsvalue.com, Hamburg Süd’s fleet of 44 vessels, all operating north-south services in the Latin America market, is valued at $1.44bn.

By Mike Wackett 01/12/2016
Maersk Line today announced it is to acquire Hamburg Süd in a cash deal one analyst claims could be worth up to $5bn.

“We estimate the takeover price in a range from $3bn-$5bn, which would increase Maersk’s leverage from 1.2x to around 1.6x full year 2017 EBITDA,” said Jeffries in a research note.

Maersk’s acquisition of the world’s seventh-biggest carrier would lift its capacity to 3.8m teu, from its current 3.1m teu, giving it an 18.6% global share.

The financial implications are harder to gauge, given the highly secretive nature of Hamburg Süd as part of Germany’s private Oetker Group.

“Profitability of Hamburg Süd hasn’t been disclosed, but we suspect it is depressed in the low container freight rate environment,” Jeffries said.

“As a result, the takeover would only create value if profitability would recover, through a combination of significant cost synergies and a potential recovery of container freight rates,” added the analyst.

The deal, following a recent wave of industry consolidation, will leave only 13 global carriers, compared with 20 at the start of the year.

According to vesselsvalue.com, Hamburg Süd’s fleet of 44 vessels, all operating north-south services in the Latin America market, is valued at $1.44bn.

The carrier recently made a foray into the east-west trades, but Maersk Group chief executive Soren Skou said today that “no decision had been made” on whether these services would continue after the completion of the acquisition of the German carrier at the end of next year.

Mr Skou told The Loadstar this morning that the “strong Hamburg Süd, Alianca and CCNI brands” would be maintained in Latin America, subject to regulatory approval, and that the east-west business “would fall within the 2M [alliance]”.

According to Alphaliner, Hamburg Süd purchases more than 2,000 slots a week from UASC, Cosco and APL as part of its global liner service offering on the Asia-Europe, transpacific and transatlantic trades.

These slot-charter agreements are set to end next April with the formation of the new vessel-sharing alliance structure, and it is difficult to see how Hamburg Süd could maintain its east-west market.

“Hamburg Süd is a very well-run and highly respected company with strong brands, dedicated employees and loyal customers,” said Mr Skou. “It complements Maersk Line, and together we can offer our customers the best of two worlds, first of all in the north-south trades.”

Chairman of Hamburg Süd Group, Dr Ottmar Gast, said the decision to “divest its engagement in shipping”, which can be traced back for 80-years, “was not an easy decision for my family”.

A separate statement from Oetker Group said continuing “active participation” in the shipping sector “would entail an even higher capital requirement”, which would “make the balancing of risk within the Oetker Group business portfolio more cumbersome”.

It added that in its view Maersk was “the ideal partner to preserve and further develop the shipping company’s successful business model”.

Mr Skou confirmed that the Hamburg Süd head office in Hamburg would be maintained, although he did not elaborate on integration of offices around the world, or the carrier’s 6,000-strong workforce, other than to pledge a “light touch”.

Mr Skou also hoped for synergies for Maersk’s terminal operation, APM Terminals, from the takeover.

He refused to be drawn on the acquisition price, other than to confirm that it was an “entirely cash transaction” with “no need to sell assets”.

Subject to obtaining regulatory approval from China, South Korea, Australia, Brazil, the US and the EU etc – a process expected to last until the latter part of next year, Maersk hopes to close the transaction by year-end 2017.

Product tankers, tramp, and other shipping-related operations made up around 7% of Hamburg Süd’s $6.7bn revenue in 2015. Mr Skou said there were “no plans for them as yet”. It is assumed they will be disposed of shortly after the takeover.

October 28, 2016

Cuba in the 40s and 50s was a playground for the rich and famous. The country’s economy was fueled by U.S. investment: some legal, some not so legal. A rich trade in coffee and tobacco found its way to America and the Cuban middle class imported everything from wearing apparel to washing machines. All that ended in 1959 when rebels under Fidel Castro tossed out Batista and threw Cuba into the dark ages.

Castro and Cuba’s Economy

Upon seizing power, the government nationalized factories and plantations; cutting free enterprise and reducing trade with the West. Commerce with the United States ceased to exist. During the next five decades policies of isolationism and heavy reliance on aid from China and Venezuela further reduced Cuba’s trade with the outside world. A once vibrant import and export market shrunk, taking infrastructure with it and placing the nation’s transportation resources far below those of the West.

Cuba’s Emerging Market

Economic reform begun under Fidel’s brother Raul led to increased privatization of business and growth within the middle class. A 2013 Brookings Institute study indicated 30 to 40% of Cuba’s population could be considered middle class when judged against other Latin nations. The report further acknowledged that consumption of foreign goods hampered by trade restrictions with the U.S. would change once embargos were lifted. Cubans aspire to own many of the products other middle class societies take for granted.

The Healing Process Continues

In December of 2014 President Obama and President Raul Castro announced the normalization of relations between Cuba and the United States. This step marking the beginning of trade recovery comes at a time when ocean carriers are placing larger vessels directly in Cuba’s path. What this will mean to Cuba’s economy depends on how much development ports and infrastructure will need to be accomplished to bring the nation up to speed.

Cuba’s Railroad

Under Fidel, Cuba relied heavily on Russian aid to help keep her railway running. After the breakup of the Soviet Union and waning interest from socialist trading partners in Europe, Cuba’s railroad fell into disrepair. In the early 1960s British Rail began funding the purchase of locomotives to upgrade the system. This endeavor was halted by the U.S. embargo. During the early 21st century China and Venezuela invested in the system and modest improvements were made. In preparation for an economic boom that trade with the West might bring, the government is investing $1.3 billion through 2021 to modernize its railroad. In addition to track work and new engines, the national railway will add computers and upgrade its communications with a fiber optic network.

Are Cuban Sea Ports ready for Big Ships?

As trade between Cuba and the Western Hemisphere increases, containers will hit the quays at the nation’s ports. There are three container ports in Cuba: Santiago de Cuba, Havana and Mariel.

Santiago de Cuba, a Traditional Port

The City of Santiago de Cuba was established by conquistadors in 1516. The port grew as the city prospered and modernized to handle cargo as needed. In 2015 Chinese investments totaling $120 million funded expansion of the Guillermón Moncada Port to create a multipurpose facility. Scheduled for completion in 2018, the new terminal will feature 758 linear feet of pier capable of handling smaller Panamax class vessels up to 40,000 dwt.

Port Havana Maintains its Footprint

Looking at the profile for Havana, it becomes evident the government is content to maintain status quo. Port of Havana Container Terminal features 1476 feet of berth with a 32-foot depth alongside. Three gantry cranes and one mobile shore side crane are Panamax class. Operating on 45 acres, the port appeals to local business because of its proximity to the city center and liberal hours of operation. Yard equipment is sufficient to handle what will soon be considered small container ships operating in the Caribbean trade. It becomes obvious that the Port of Mariel located less than 35 miles from Havana will receive funding needed to bring that facility up to speed.

Mariel, a rising star on Cuba’s Map

Nine hundred and sixty three nautical miles north/northwest of Cristobal lies the Port of Mariel Cuba. Interestingly enough it is only 43 miles north of the Dominican load center of Santo Domingo. In terms of serving the Caribbean, Mariel is in range. Built on the site of an old submarine base, Mariel is big ship ready and the government is aggressively promoting expansion to maximize trans-load cargo. Built in 2014 by the Brazilian conglomerate Odebrecht S.A., the port is operated by PSA Ports International. Four Post Panamax cranes cover 2,296 feet of quay giving the port an annual capacity of 800,000 TEUs. Within the next four years an additional 984 feet of berth will be added supported by two Neo-Panamax cranes. The main channel currently deep enough for Panamax ships will be dredged by 2017 to accommodate VLCS class Neo Panamax vessels. Brazil has helped to finance just under $600 million of the ongoing construction, which will add an additional 5,577 feet of quay and facility upgrades boosting the annual capacity to over 3 million TEUs.

Cuba Emerges

Closer to the U.S. Gulf and South Atlantic than other trans-load points in the region, Cuba will be an asset for carriers looking to connect cargo from intermediary ports to the U.S.

This year the Cuban government and the Virginia Port Authority signed a cooperative agreement to increase trade and establish a direct service between Virginia and Cuba. With deep water, a sizable throughput capacity and Super Panamax Cranes, Mariel’s transition from national to international port is assured. Who will be the first to offer direct container service from Mariel to the United States?

October 24, 2016

By Gavin van Marle
24/10/2016
Prospects of the Cuban port of Mariel capturing US transhipment volumes have significantly improved since the US government last week lifted a ban on foreign vessels calling at US ports within 180 days of calling at Cuba.
The US Treasury’s Office of Foreign Assets Control (OFAC) and Commerce Department’s Bureau of Industry and Security (BIS) issued a general licence, waiving the restriction as part of the ongoing programme to restore relations between the two countries.
Treasury Secretary Jacob Lew said: “President Obama’s historic announcement in December 2014 charted a new course for a stronger, more open US-Cuba relationship. The treasury department has worked to break down economic barriers in areas such as travel, trade and commerce, banking, and telecommunications.
“Today’s action builds on this progress by enabling more scientific collaboration, grants and scholarships, people-to-people contact, and private sector growth. These steps have the potential to accelerate constructive change and unlock greater economic opportunity for Cubans and Americans.”
Secretary of Commerce Penny Pritzker added: “These amendments will create more opportunities for Cuban citizens to access American goods and services, further strengthening the ties between our two countries.
More commercial activity between the US and Cuba benefits our people and our economies.”
The lifting of these restrictions is also key to the development of the deepwater container terminal at Mariel, close to the Cuban capital of Havana, which has set itself the target of winning US transhipment cargo from the new neo-panamax vessel sizes now using the enlarged Panama canal.
At the recent TOC Americas Container Supply China event, Charles Baker, general director of TC Mariel, the PSA International-managed container terminal at the port, said lifting the embargo would “allow shippers and their 3PLs to reconsider the overall cost of their deepsea supply chains”.
While some ports on the US east and Gulf coasts have invested heavily in dredging access channels to accommodate the larger ship sizes, others that have yet to complete these programmes, and Mr Baker claimed the Cuban port was ideally located to serve as a first port of call on Asia-US east coast services and act a as a feeder point for ports such as Mobile and New Orleans.
“The normalisation of trade between Cuba and the US is something that is good for the entire region because more investment will come into the region from US companies,” he added.

October 19, 2016

Before its expansion, the Panama Canal was sending 4,500 TEU ships into the Caribbean with containers for trans-loading and final destination. Larger 8,500 TEU vessels transiting the Suez brought a little more volume to island hubs.

Terminals in Jamaica and the Dominican Republic became trans-load centers for the Caribbean and US port range, while facilities in Colon could swing cargo to a wide range of destinations including South America.

Trans-shipment in the Caribbean Sea

Jamaica

The port of Kingston, Jamaica is getting a facelift with the infusion of $600 million for upgrades and expansion to Kingston Container Terminal (KCT). Terminal Link, a subsidiary of CMA CGM and the Jamaican Government, entered into a partnership called Kingston Freeport Terminal Ltd. (KFTL). KFTL will operate the port jointly for 30 years before turning the facility back to Jamaica. Terminal Link will invest $460 million on reinforcing 394 feet of the wharf to meet Euro Code standards and dredging alongside 2,625 feet of the quay to 51 feet. The remaining funds will be spent on terminal expansion and upgrades. In addition the government will seek private partnerships to spend $130 million to dredge Kingston’s harbor to accommodate Neo-Panamax vessels arriving from the canal. The government believes partnering with Terminal Link will bring a major dynamic to the table through CMA CGM’s world-class service with strong ties to Caribbean and Latin Markets.

The Dominican Republic

Prior to the canal’s expansion, the Port of Rio Haina in the Dominican Republic was capable of handling trans-load traffic for the region. With just under 1,731 linear feet of usable wharf face, the Puerto Hiana Oriental facility could accommodate one Panamax vessel working it with two shore-mounted cranes. Thirty minutes east of Santo Domingo lay the suburbs of Boca Chica and Andres. On the adjoining coast sits the Port of Caucedo. Operated by DP World this facility is fully capable of handling the largest ships the Panama Canal can throw at it. Opened in 2002 the port had from its inception counted on the growth in traffic an expanded canal would bring to the Dominican Republic. A 3,280-foot quay comprising three berths with 49.2 feet of water alongside each is sheltered from the open sea by 2,952 feet of breakwater. DP World holds a 50-year concession on the facility and intends to expand its capacity from 700,000 TEUs to over one million containers. The consortium of NYK, Evergreen and Hyundai operating joint services in the Caribbean have spent $15 million to create a Caucedo Logistics Center to improve their competitiveness in the region. The Center will coordinate the discharge and trans-loading of containers destined to various ports served by the three partners.

The Colon Connection

While port expansion in Balboa has taken center stage in recent years, the three terminals comprising the Atlantic port of Colon should not be overlooked.

Hutchinson Port Holdings (HPH) Cristobal: HPH operates two terminals in Panama, one on each coast.

Placing emphasis on the cruise industry, Hutchinson added a state of the art berth number 6 to Cristobal Port, which can handle two of the largest ships, which enter or exit the canal. The container terminal has 11 berths with a total of 14,468 feet of wharf. Thirteen Panamax and Post Panamax cranes handle vessels drawing up to 42 feet of water. The facility’s annual capacity is 2 million TEUs.

Manzanillo International Terminal (MIT): Built on the old Coco Solo Sur Naval Base, MIT is operated jointly by Carrix Inc. (SSA Marine) and the Motta and Heilbron families. A multimodal facility, the container terminal is equipped with 19 Post and Neo Panamax cranes on 5,380 linear feet of quay. The current depth alongside is 42 feet but can be dredged to 49 feet in the future. MIT has an onsite logistics park adjacent to the FTZ (Free Trade Zone) and easy access to the Panama Canal Railway. The terminal handles around 3.5 million TEUs per year.

Colon Container Terminal (CCT)

Operated by Evergreen Marine, CCT can handle 2.4 million containers per annum. The depth at the newly completed Berth 4 is 54 feet. Three Neo Panamax cranes discharge vessels loaded with 23 containers across their beam. Plans to deepen Berth 3 and extend both 3 and 4 will bring the total useable wharf up to 2,559 feet allowing the facility to handle two 13,000 TEU ships at the same time. CCT has easy access to the FTZ and near dock connection to the railway.

The Next Generation of Hub and Spoke Shipping

As the Caribbean gears up for Very Large Container Ships (VLCS), ports will have to become more competitive. The winners will be those terminals, which can turn boxes quickly and efficiently. It will require a combination of deep draft, available cranes and skilled labor. Wider beam VLCSs will need cranes with greater out-reach. Crane operators will also have to be conscious of lift and discharge time. Today’s facilities are only achieving 28 to 32 lifts per hour. To turn transition cargo quickly the terminal will need to either increase lifts per hour or add additional cranes to each vessel worked. The container boom is just beginning in the Caribbean Basin. Will that momentum reach the trans-load ports of Latin America?

June 27, 2016

A statement from CMA CGM said: “Reflecting on new possibilities, maritime companies can rethink their routes, including that from Asia to the US east coast. For example, on the journey between New York and Hong Kong, the choice to sail by Panama or Suez canal is subtle: there is just one day difference. “Until now, the canal dimensions limited the size of ships and impacted the region’s technological and commercial strategies. With the lifting of such constraints the evolution of vessels is probable, initially from 5,000 to 9,000 or to 10,000 teu or even larger. The traffic is not likely to rise, but volumes in transit will probably increase.” The line added it would now look to develop the Jamaican port of Kingston as its central hub in the region. Last year it signed a $509m deal worth with Port Authority of Jamaica that transferred ownership of its container terminals to CMA CGM on a 30-year build-operate-transfer model. This will see the terminal expanded in two phases, with capacity taken successively up to 3.2m teu and 3.6m teu, and the port’s draught deepened to 14.2 metres by the end of 2016, and then to 15.5 metres. CMA CGM has formed a special purpose vehicle to bid for the project – Kingston Freeport Terminal – comprising its remaining port business, CMA Terminals, and Terminal Link, its container terminal operating company in which China Merchants has a 49% stake. Luc Portier, CMA CGM’s director of studies, projects and development, said: “A widened canal will bring new opportunities for world trade. CMA CGM has foreseen these changes and made Kingston a strategic base: modernisation works will allow the group to operate all larger vessels sailing in the area, and make Jamaica a transhipment hub for the whole sub region.”

June 23, 2016

HOUSTON, Texas - Crowley Maritime Corporation announced today that it will begin offering weekly, fixed-day, less-than-container-load (LCL) shipping services from Houston to 33 port destinations throughout the Caribbean Basin on July 1. The new logistics service will be the only one of its kind available from the Houston gateway.
This new offering is designed to further enhance supply chain options for those shipping directly into the Caribbean Basin from the West and Gulf Coasts of the U.S.
“Customers will be able to drop their cargo in Houston, and with our weekly, fixed-day service, have their cargo landed virtually anywhere within the eastern and western Caribbean, and Central America,” said Mike Griglione, Crowley’s general manager of logistics in Houston. “This is just another way we are adding value to our customers’ supply chains by both increasing the velocity of those supply chains with our integrated services and reducing their total landed cost.”
“No other logistics company is providing a weekly, fixed-day, LCL service like this to the Caribbean Basin from Houston,” said Ken Black, Crowley’s general manager of logistics in Miami, adding that it is just one facet to a comprehensive suite of logistics services being provided by Crowley in Houston.
In addition to LCL transportation, Crowley also offers custom packing options, cargo consolidation and deconsolidation, warehousing, distribution, cross-docking, freight forwarding, import/export documentation, last-mile delivery, cargo insurance and customs brokerage services for cargo of all types and sizes.
LCL cargo shipments from Houston should be booked by calling 1-800-CROWLEY, and the cargo should be consigned to Crowley Logistics, Inc. c/o Customer Name, Destination Country; 15894 Diplomatic Plaza Dr., Houston, Texas 77032. Weekly cargo cutoff is noon every Thursday to ensure prompt departure and delivery to destination.

When Ports Finally Ditch Fax Machines, Cargotec Plans to Profit
By: Niclas Rolander | Jun 23 2016 at 03:10 AM | Ports & Terminals
Finland’s Cargotec Oyj is vying for new contracts later this year to modernize ports as the equipment supplier to maritime hubs from London to Los Angeles promotes technologies rendering fax machines and even workers redundant.
Cargotec is aiming to ride a wave of investment in digital communication and automation set to transform maritime trade and boost its own profits, Chief Executive Officer Mika Vehvilainen said in an interview. After joining the company from flag carrier Finnair Oyj in 2013, he said he was shocked by the rudimentary state of technology for exchanges between ports and giant cargo ships.
“It’s surprisingly old-fashioned,” he said at the company’s headquarters in Helsinki. “In many cases these people are actually sending faxes to each other, or making phone calls, and they only share the information a few hours before docking.”
Battered Confidence
The Finnish company, which had sales last year of 3.7 billion euros ($4.2 billion), is seeking to expand further in services and software from its traditional businesses of making cargo handling equipment like cranes and forklifts. Carved out of elevator manufacturer Kone Oyj in 2005 and built up through acquisitions, Cargotec is also trying to win back investor confidence battered by past profit warnings. With just a tiny proportion of global ports now equipped with some form of automation, it expects that market to be worth almost 1.5 billion euros annually in the coming years.
“We are talking to about 70 ports about automation capabilities,” Vehvilainen said. “Ultimately, all container ports in the world will be automated.”
Cargotec’s port-equipment unit, Kalmar, has already taken part in about half of these types of projects in the world, and Vehvilainen expects to sign “a few” more deals in the second half of this year. For an industry that hasn’t always greeted change with open arms, the switch is slow-moving, he said.
Globally, around 5 percent of the estimated 680 container terminals in operation are at least semi-automated, with around 10 new automated ones in the pipeline, according to consultancy Drewry Maritime Research.
Tipping Point
“The tipping point has been reached,” Daniel Schäfer, a market analyst at DS Research, said in a phone interview. The biggest container terminal operators like APM Terminals, DP World and PSA have now automated some installations, which are working reliably, so a “second wave” is expected, he said.
For its part, Cargotec’s Kalmar supplied software-controlled machinery for container terminals like London Gateway port on the north bank of the River Thames and TraPac LLC’s facility in the port of Los Angeles. It raised research and development spending by almost 25 percent last year in a bid to stay ahead of competitors like China’s ZPMC, Austria’s Palfinger AG and U.S.-based Terex Corp., the world’s largest provider of unmanned container transport vehicles.
Still, automation faces opposition from labor organizations seeking to protect workers from being replaced by equipment, harking back to the container revolution in the 1960s when hundreds of thousands of jobs were lost at ports around the world because the goods-packed metal boxes could be loaded onto ships by crane.
Demands for automation are rising along with global trade volumes and larger ships, like Mediterranean Shipping Company’s MSC Oscar vessel which can carry up to 19,224 twenty-foot containers.
Four of 10 analysts surveyed by Bloomberg have a sell rating on Cargotec, and shares are trading at about 13 times estimated earnings this year, lower than most Finnish industry peers, in part due to a series of earnings misses and profit warnings that had analysts questioning the previous management’s strategy. In October 2012, Cargotec cut profit guidance for the second time in four months due to cost overruns in terminal projects. The stock has risen 5 percent since the start of the year, giving it a market capitalization of 2.4 billion euros.
“There were too many negative surprises,” Vehvilainen said. “People have long memories.”
Cargotec’s three business areas including Kalmar get slightly more than 20 percent of revenues from services, far below the levels at other Nordic manufacturers like Konecranes Oyj, Metso Oyj, Atlas Copco AB and Wartsila Oyj. By 2020, Cargotec wants to get 40 percent of revenue from service and software businesses, which Vehvilainen said could provide hundreds of millions of euros in additional sales.
“We have done a very poor job in the past in terms of developing our services,” he said. “That’s a sad story.”

June 08, 2016

JUNE 8, 2016 — The U.S. marine industry is condemning a measure proposed by Rep. Gary Palmer (R-AL) that would exempt Puerto Rico from the Jones Act – which requires waterborne cargo between two points in the United States to be transported on vessels that are American built, owned, and crewed.
The Palmer amendment to H.R. 5278, the Puerto Rico Oversight Management, and Economic Stability Act ("PROMESA"), if adopted,would allow foreign vessels to replace American ships and crews in the operation between the island and U.S. mainland.
"Given that the Jones Act and U.S. shipyard industry support more than 12,800 jobs and contributes over $953 million in GDP to the U.S. economy from Alabama alone, we are disappointed that Rep. Palmer seems to be more focused on political maneuvering than on protecting our nation's domestic and economic security," said Matthew Paxton, President of the Shipbuilders Council of America (SCA). "Exempting Puerto Rico from the Jones Act would do nothing to address island's debt crisis and would actually jeopardize the more than $1 billion the U.S. maritime industry has invested in the Puerto Rican shipping trade, as well as the thousands of good-paying jobs on the island."
The American Maritime Partnership said the amendment, if adopted, would undercut both American shipbuilders and operators that support the Puerto Rico trade, and the ability for the United States to have shipbuilding and transport capacity during times of war. The amendment also would expose American waterways and ports to foreign vessels traveling from Puerto Rico, where previously they were barred.
"The Jones Act is not a cause for the island's financial woes. While other industries have fled the island, the domestic maritime industry has made significant capital investments to service the economy and support thousands of family-wage jobs for Puerto Ricans," said Tom Allegretti, AMP Chairman. "Weakening the Jones Act would harm, not help, the Puerto Rican people and the Commonwealth's economy. In fact, a vote against the Jones Act is a vote to outsource American jobs, undermine national security, and degrade homeland security."
AMP says that sponsorship of the amendment by Rep. Palmer is surprising given that Jones Act shipping and shipbuilding is a major industry in Alabama, a "top ten" shipyard state, with 12,800 jobs, according to a study by the U.S. Maritime Administration. Shipbuilding provides $953 million in economic impact in Alabama each year with shipyard jobs paying well above national average wages.
Rep. Duncan Hunter, Chairman of the House Coast Guard and Maritime Transportation Subcommittee, recently stressed the importance of the Jones Act and its vital role in protecting the security of U.S. borders in the Washington Times, saying: "It's imperative not to conflate the unrelated issues of Puerto Rico's debt and the Jones Act, and to fully grasp the importance of ensuring the safe transport of goods between American ports. There must also be acknowledgment of the dire consequences of exposing ports and waterways to foreign seafarers."
The AMP has released a blow-by-blow refutation of claims put out by Jones Act opponents.
CLAIM: The Jones Act does not contribute to national security.
FACT: The Department of Defense ("DOD"), Navy, and Coast Guard are among the strongest supporters of the Jones Act because the military relies on the commercial maritime industry for its sealift capacity. Within the last year, senior military leaders, including the Commandant of the Coast Guard, have emphasized the critical need for the Jones Act for national security. Also, in a preeminent study of the Jones Act in Puerto Rico, the independent U.S. Government Accountability Office ("GAO") discussed the harm to national security if the Jones Act was changed there. Finally, DOD itself has estimated that it would incur annual costs of tens of billions a year if it were forced to replicate the benefits of the commercial maritime industry.
CLAIM: Changing the Jones Act in Puerto Rico will help the island, especially considering its current economic crisis.
FACT: Changes to the Jones Act in Puerto Rico would undermine national security, reduce border protection, and outsource American jobs. The GAO study on the Jones Act in Puerto Rico listed a number of potential harms to Puerto Rico itself if the Jones Act were changed, including the possible loss of the stable service the island currently enjoys under the Jones Act and the loss of jobs on the island. Moreover, American domestic carriers are making some of the largest private sector investments currently underway in Puerto Rico, spending nearly $1 billion in new vessels, equipment, and infrastructure. They employ hundreds of Puerto Rican American citizens on the island, on the mainland, and on vessels serving the market, providing highly reliable, low-cost maritime and logistics services. These private sector jobs and reliable services are important to the long-term recovery of the Puerto Rican economy and would be jeopardized by changes to the Jones Act.As recently as a week ago at the 2016 Navy League Sea-Air-Space Exposition, the U.S. Maritime Administrator was clear that attacks claiming that the Jones Act punishes the residents of Puerto Rico are "unfounded" and that "there is no supporting information and every time the government has taken a look at it they have found it to be the contrary of that."
CLAIM: The Jones Act increases the cost of goods in Puerto Rico.
FACT: Over the last decade, a parade of politicians and "experts" has attempted to estimate the so-called "cost" of the Jones Act in Puerto Rico. Because the estimates have been wildly contradictory, in 2012, Puerto Rico Delegate Pierluisi asked the GAO to determine the true "cost." The GAO studied the issue for more than a year and debunked the previous estimates. First, the GAO said there are far too many factors that impact the price of a consumer good to determine the supposed cost related to shipping, much less the Jones Act. Second, the GAO said, one could not truly estimate the cost unless one knew which American laws would be applied to foreign ships if they were allowed to enter the domestic trades, which would certainly increase the cost of shipping on foreign vessels.
CLAIM: Changing the Jones Act in Puerto Rico is a narrow fix that does not impact the rest of the country.
FACT: Not true. Changes to the Jones Act in Puerto Rico would undermine hundreds of millions of dollars of recent investments in modern, state-of-the-art American vessels operating between the U.S. mainland and Puerto Rico. More broadly, altering the fundamental regulatory structure in Puerto Rico — literally changing the rules in the middle of the game after massive investments were made in new vessels for that trade — would undermine future investment in every segment of the Jones Act industry nationwide. Even the GAO discussed the potential ripple effects of a Jones Act change in Puerto Rico throughout other American regions. Changing the Jones Act for Puerto Rico would not affect only Puerto Rico; instead, the implications would quickly affect the entire domestic maritime industry.
CLAIM: The Krueger report from Puerto Rico said, "Import costs [are] at least twice as high [in Puerto Rico] as in neighboring islands on account of the Jones Act."
FACT: There is no study that supports this statement in any way, and the Krueger report cited none. In fact, anecdotal evidence about rates indicates that the opposite is true. For example, one analysis shows it is 40% more expensive to ship goods from the U.S. mainland on foreign vessels to the U.S. Virgin Islands (not subject to the Jones Act) than on Jones Act vessels to Puerto Rico.
CLAIM: The U.S. Virgin Islands are not subject to the Jones Act, so why should the Jones Act apply to Puerto Rico?
FACT: The two areas are treated very differently under U.S. law. Since 1917, Puerto Rico has operated under a legal structure that generally makes U.S. federal law automatically applicable in Puerto Rico, just as it would be in any American state. That is not true in the Virgin Islands. Also, importantly, the U.S. Virgin Islands are outside the U.S. customs territory while Puerto Rico and the United States are inside the U.S. customs territory. Historically, the Jones Act has applied to U.S. territories inside the U.S. customs territory and not applied to those outside of it.
CLAIM: The Jones Act has undermined Puerto Rico's efforts to import liquefied natural gas (LNG).
FACT: Flatly false. American carriers pioneered the use of LNG in Puerto Rican markets, deploying the world's first LNG-powered containerships and developing small-scale LNG supply and logistics services to help manufacturing and other industrial facilities on the island reduce the cost and improve the reliability of their energy supply. Puerto Rico's real impediment is limited mainland U.S. export facilities and import facilities on the island, infrastructure to utilize LNG on the island, and demand for bulk LNG. Qualified American vessels are fully prepared to provide bulk LNG transportation services to the island. They could begin service promptly using any of the dozens of LNG vessels already authorized to operate in the trade. Or they could design and build new LNG vessels in full compliance with American safety and regulatory standards, including the Jones Act. Blaming the lack of LNG on the Jones Act is a red herring.
CLAIM: All cargo shipped in or out of Puerto Rico must be transported on Jones Act vessels.
FACT: This is a common misconception. Cargo from anywhere in the world can be imported into or exported directly from Puerto Rico. In fact, nearly two-thirds of the vessels calling on Puerto Rico are foreign.